Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1887-07-30
A history.
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furnished to the patrons of such roads: an,
! .heii report shali embrace consideration o
| the interests ana rights of said communities a.
affected by whatever plan of sett' ement or pay
ment OF the existing debt may be proposed.
| Answer-The facilities and accommodation!
| iurnished to patrons of these roads are first
| class, There is a suficiency of passenger and
| traffic. M
IL. Said Commissioners shall also eons;de,
| and report whether the interests of the United
states require any extension of the time for per.
| torrance of the obligations to the United States
OF said companies, or any of them, and the facts
| and circumstances upon which such opinion is
| based.
~. Including the security held by the United
states Tor the performance of such obligations,
| and the value thereof.
40. And if. in their opinion such extension
shall be required by the interests of the United
states, they shall submit scheme for such ex-
tension which shall secure to the United States
| full payment of all debts due them from said
companies, with reasonable rate of interest,
| in such time as the Commissioners shall propose
| having due regard to the financial ability OF
| said companies and the proper conduct of their
business in such manner as shall afford efficient
| service to the public.
Answer-Questions Al, ~ and As relate to the
pollcy that shall be adopted with reference to
the payment by the company of the debts due
the Government, and therefore consider them
together.
We have lhown among other things:
f1rst-That the company had to sell the Gov
ernment bonds at discount, and thereby sus-
tanned loss of S7,120 073 interest this loss to
maturity So, sic, 1872 50.
Second-That the Government saves sl7 76s =
IT'S in transportation between the time when the
road was completed and the time when it
might have been completed according to the
contract
Third-That the company has lost 81 6l2. 9e6 -
IN being forced to pay into sinking fund estab
lished by Congress large amounts of money for
which 1t not only has not received any interest
but the company has not much money now
as it paid therein by 100000.
Yesterdays Proceedings.
The Commission resumed the examination
yesterday, Senator Stanford appearing to con
tlnue his testimony. Upon entering the room
he remarked e" ! see by the papers that Won
thodght yesterday we were not ready. Why
| was in my Office all the time awaiting your
pleasure
tison.
The examination of Senator Stanford was
then resumed at Question IL of the list prepared
by the Commission, which was whether the
interests of the United States require any ex-
tension OF time in which to allow the compa-
mics to discharge their obligations to the Gov
eminent The witness testified that the Gov
eminent lien only extends to the Central Pacific
from Oregon TO Sacramento and the Western
Pacific from Sacramento to San Jose. In regard
to what further security the company
its obligation, he thought the Govern
ment ought TO consider the equities of
the case and make fair aud liberal settlement
as originally contemplated by Congress, to the
end that the company may be able to discharge
It's Indebtedness. the burdens of the company
had been vastly increased on account of the
ruinous discount suffered in selling its first
mortgage bonds, and the high price and ma.
terial OF labor at the time the road was con.
structed, the snow blockades of the Sierras. and
the fact that all transportation had to be done
by teams.
The average cost to the Government of trans
portation overland between 1880 and the com.
pletion of the G. P. was about $40 900 ,000 This
does not include the cost of maintaining fo.t
nor the cost of carrying the mails or munitions
of war. AS shown by the books of the company
1t now costs 81 $50 900 per annum for Govern
ment transportation, saving of 80 per cent.
\ SOURCE or LOSS TO THE COMPANY.
The C. P. and W. P. roads were compelled to
pay gold for all work done in the construction
of the road. The bonds guaranteed by the Gov
eminent were payable in thirty years at 6 per
cent, the principal and interest being PAYABLE
in lawful money, which was then Currency
These have always been known as "currency
skies, and they were the only bonds issued BY
the Government which could not be redeemed
by It at its option at any time before maturity.
Owing to the irredeemabe character of the
bonds, the company has sustained heavy losss
in being compelled TO pay into a sinking fund
large sum of money for hich they are getting
no interest whatever. and at the same time be-
standing bonds. During the time the road was
being constructed the company experienced
great difficulty in meeting its obligations be-
cause of the discount on Government Sc
curities on account of the existence of the
civil war. For instance the company disposed
of the bonds issued to il at loss of ST. 40 073,
and at the maturity of the same will have to
pay in round number $50 00U, 000 for which il
never received a dollar, besides paying per
cent interest. This was an item in the cost of
construction generally overlooked.
Anderson asked concerning CT ta Want
that the bonds of the railroad company were
sold low in consequence of the prevalence of
the civil war. He remarked that no bonds were
Issued to the Central Pacific until 1866
Senator Stanford thought the company re-
ceived some bonds before that year, but he
might be mistaken. He knew that negotiations
Tor the sale of bonds had to be made year in
advance, and that the losses of the company
from this cause had been figured out to be about
SN,OO0,OO0. That is, the company will be re-
quired at maturity to pay that much more than
IL received in order to redeem its obligations.
During the construction of the road its obliga-
tons had to be met in gold, the loss from this
cause being about 81, 000. 600 upon every $40 000
600 expended. The loss upon the sale of the
first mortgage bonds was also heavy from the
same cause.
VALUE OF BONDS IssuED.
Senator Stanford gave the par value of the
bonds issued to the Central Pacific and Western
Pacific roads as follows: Central Pacific, s25-
SS5, 100; Western Pacific, 81 $40, $50. Total-Sg-
S55,6S0. The issues were made between 1865 and
1869, with small number in 1870. During this
period currency averaged a discount of over so
per cent, selling as low in January 1865 as A. 66
cents on the 81 to S3.6S cents in December 1869
The amount received by the company for each
bond of 81 900 was S144 "A. For the S27, SIS $50
the company received in coin $40 735, SOC As
The interest at per cent on this loss for thirty
years viii amount to 81, 1872 39. The total
principal and interest lost to the com any on
these bonds is, therefore, SO, 1856 2O5 81.
Under the provisions of the Thurman Act the
company has been forced to pay for these bonds
from the sinking fund in the United states
Treasury premium of about 81 per cent. 1t has
thus suffered loss in premiums on the redemp-
ton OF bonds of an equal rate to the 10 in dis
eouat on their issue. The sinking fund of the
Central Pacific now in the Treasury amounts to
g, $4,000 To secure these bonds the Secretary
of the Treasury has paid an average premium
OF 343l per cent or: for each 81 900 bond, he has
paid 81 .342 10. As these bonds must be held in
the fund till the maturity OF the debt, when
they viii be redeemed by the Government at
par, the premium paid is wholly lost.
WHY THE CENTRAL PACIFIC COST so MUCH.
All this added to the loss already noted. made
the company pay for each 81 900 bond at the end
OF thirty years sS.li2 10. Thus, for each 81 900
received in coin from the Government, the Cen
trail Pacific Company is charged with 81 ,220 rs
1t was safe to say that the road cost double what
it would have cost had the time allowed by Con
gress been fully exhausted. It was built seven
years before the time allowed. The witness
gave long description of the difficulties that
had to be overcome in the construction of the
TOau. Inc carry competitor OF the enterprise
had in round numbers saved the Government
SO, 600, and at a corresponding loss to the
company. owing to the sacrifice of the bonds
and other causes, as already noted. BY the
completion of the road he figured out that the
Government had saved in transportation to De
cember 81, 1886 $3.50 347 al, and by the maturity
of the bonds, S259,0f0, 40.
RESULTS OF HOSTILE LEGISLATION.
The company he said. had been greatly en-
barrassed by hostile legislation, local and gen
erai. The assaults made on the rates charged
by the company by the local legislation had
from time 10 time embarrassed 1t in borrowing
money or disposing of its securities.
Ex-Governor Pattison asked the witness If any
hostile law had ever been passed
Senator Stanford said none that he remembered
until the adoption of the new Constitution. He
! considered that the Railroad Commission set uI
| by that instrument was essentially hostile to
railroad enterprise, because it conferred on
| three men the power to fix any rate of freight
A.